Class 11 Business, Trade and Commerce

What business is and how it differs from a profession and employment, the kinds of industry, commerce as trade plus its auxiliaries, the objectives of business and business risk.

Key ideas

Business, profession and employment are economic activities, done to earn a living; non-economic activities are done out of love, duty or service.

Business is the regular production or buying and selling of goods and services to earn profit; its returns are uncertain and it always carries risk.

Industry produces or processes goods: primary (extractive and genetic), secondary (manufacturing and construction) and tertiary (support services such as transport and banking).

Commerce is trade plus the auxiliaries to trade; together they remove the hindrances between the producer and the consumer.

Profit is the main objective, but a business also aims at market standing, innovation, productivity, good use of resources, manager and worker development, and social responsibility.

Business risk comes from natural, human, economic and other causes; it can never be removed completely, and profit is the reward for bearing it.

Remember

Business, profession, employment

reward: profit / fee / salary; qualification: none / specialised training / as the employer sets

Primary industry

extractive: mining, fishing, forestry; genetic: poultry farms, nurseries, cattle breeding

Kinds of manufacturing

analytical separates (oil refinery); synthetical combines (cement); processing works in stages (sugar, paper); assembling fits parts (cars)

Auxiliary and the hindrance it removes

transport: place; warehousing: time; insurance: risk; banking: finance; advertising and communication: information

Kinds of trade

internal (within a country); external: import, export and entrepot (importing in order to re-export)

Causes of business risk

natural (flood, earthquake); human (theft, strike, carelessness); economic (demand, prices, competition); other (machine breakdown, exchange rates)

Watch out

Calling a doctor running a clinic a business: it is a profession, rewarded by a fee.

Mixing up analytical and synthetical industry: analytical separates one material, synthetical combines several.

Matching warehousing with place and transport with time: warehousing removes the hindrance of time, transport the hindrance of place.

Worked example

Akash Plastics faced these events in one year: (a) A flood washes away a warehouse. (b) Heavy rain spoils a crop that a mill was to buy. (c) Careless handling by staff breaks costly goods. Classify the cause of each business risk. Why is risk said to be an essential part of every business?

Working: natural: forces of nature; human: people’s acts or mistakes; economic: changes in demand, prices or competition

Answer: (a) natural causes (b) natural causes (c) human causes. Business deals with an uncertain future, so some risk always remains; profit is the reward for bearing it.